Key features of a Limited Liability Partnership (LLP)

LLPs were introduced into Lloyd's for the 2007 account, and allowed members to underwrite a syndicate portfolio within the framework of a limited liability vehicle. The LLP is a tax-transparent vehicle, which retains a separate corporate identity from its partner members. Each LLP must have three partners/members, but two of these can be provided by a Service company, such as Nomina.

An individual or group of family members, or associated individuals, can form an LLP.

As with a NameCo, a new LLP needs to have been set up by the end of August (at the very latest), so as to allow plenty of time to plan for the auctions which take place in September.

As is the case with a NameCo, the LLP trades on a limited liability basis. In practice this means that liability is limited to the assets held within the LLP.

Tax implications of LLP

The LLP is a tax-transparent vehicle. Underwriting profits are subject to income tax.

Underwriting profits are deemed to be earned income, and this therefore means that the individual Members within the LLP are assessed for tax purposes, on the basis of their own individual earnings.

Earnings from the LLP are deemed to be earned income for pension purposes. This means that Members can pay all or part of their profits into a personal pension plan (subject to their normal yearly and lifetime UK contribution limits). They are also allowed to claim their appropriate tax relief against income tax.

Trading losses can be offset against future profits made by the LLP or against other income.

After two years of trading, Members are able to claim 100% Business Property Relief on the underwriting capital and assets of the LLP. This reduces the inheritance tax liability on a members’ estate.